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2016 (2) TMI 625 - ITAT DELHI

2016 (2) TMI 625 - ITAT DELHI - TMI - Deemed dividend under Section 2(22)(e) - Held that:- It is only the payment by a company during the relevant previous year which could be brought to tax (when it satisfies other conditions of section 2(22)(e) as deemed dividend. The phrase used u/s 2(22)(e) is "any payment by company”. In case the AO's action is to be upheld, then the appellant becomes liable to tax every year as long as the opening balance of advance continues in his books of accounts. This .....

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r the TOD no loan was raised and just ₹ 72,618/- was expended on the same. An investment of ₹ 4.5 crores has been made during the previous year relevant to current assessment year and no fresh loans have been raised. There are fresh funds in the form of sundry creditors & advances from customers which more or less match with the fresh quantum of investment. The secured loan at the year end was Nil. All these facts go to show that the AO has not been able to show-that the borrowed fun .....

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ement [2011 (11) TMI 267 - Delhi High Court] the action of the AO in invoking rule 8D was not justified. Despite the observation, the CIT(A) has upheld disallowance of ₹ 4,22,000 towards administrative expenses. In view of the above discussion, we find that the order of ld. CIT(A) on the issue in dispute is well reasoned and, therefore, no interference is required - Decided against revenue - ITA Nos. 138 & 139/Del/2014 - Dated:- 19-2-2016 - Smt. Diva Singh, Judicial Member And Sh. O. P. Ka .....

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instant appeal, Revenue raised the following grounds of appeal: 1. The order of learned Commissioner of Income Tax (Appeals) is not correct in law and facts. 2. On the facts and in the circumstances of the case, learned Commissioner of Income Tax(Appeals) has erred in law in deleting the addition of ₹ 55,14,626/- on account of deemed dividend under Section 2(22)(e). 3. On the facts and circumstances of the case, learned Commissioner of Income Tax(Appeals) has erred in law in deleting the a .....

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the assessment years involved. In response to the notice under Section 153A of the Act issued on 28.04.2010, the assessee filed return declaring income of ₹ 16,93,882/- on 29th October, 2010. Subsequently, notices under Section 143(2)/142(1) of the Act were issued and certain disallowances/additions were made by the ld. Assessing Officer. Aggrieved with the additions/disallowances the assessee filed appeal before the learned Commissioner of Income Tax (Appeals), who partly allowed the app .....

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lip Group was appearing as opening balance in the books of the assessee company. It was further observed by the Assessing Officer that during the relevant previous year, the assessee company subscribed to the share capital of M/s. Sharad Enterprises pvt Ltd and acquired 13,332 equity shares out of 54,996/- equity shares of that company. The Assessing Officer was of the view that the share holding of the assessee company being more than 10 percent. and there was an accumulated profit in the books .....

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the relief to the assessee. 5.1 Before us, the ld. CIT(DR) relying on the order of the Assessing Officer submitted for sustaining the additions. No one represented on behalf of the assessee. 5.2 We have heard the submission of ld. CIT(DR) and perused the material on record. The fact that the advance in question was appearing as opening balance in the books of the assessee and the assessee became shareholder of the M/s. Sharad Enterprises Pvt. Ltd. during the previous year only, are not in dispu .....

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ixed rate of dividend) holding not less than 10% of the voting power . 4. The company was having accumulated profit. 5.3 But in the fact of the case of the assessee, the payment was received in a year prior to the relevant previous year and at that relevant point of time of receiving the advance, the assessee was not the beneficial shareholder of M/s. Sharda Enterprises Pvt. Ltd. and thus the conditions of Section 2(22)(e) of the Act are not fulfilled in the case of the assessee. The finding of .....

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ance from Sharad Enterprises Pvt. Ltd. during the year. The AO has added the opening credit balance standing in the name of Sharad Enterprises Pvt. Ltd. in the books of the appellant as deemed dividend. 4.3.2 The AR has pointed out that U/S 2(22)(e) only the amount received during the year as advance could be brought to tax as deemed dividend and not the amount which was received during the earlier period. 4.3.3 I agree with the submissions of the AR. It is only the payment by a company during t .....

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In view of the above discussion, we are of the opinion that no interference is required in the finding of the ld. CIT(A). Accordingly, we dismiss this ground of the appeal. 6. In ground no. 3, the Revenue has contested the deletion of addition of ₹ 72,618/- under Section 36(1)(iii) of the Act by ld. CIT(A). The ld. CIT(DR) relied on the order of the Assessing Officer. 6.1 We have heard the submission of ld. CIT(DR) and perused the material on record. The Assessing Officer noticed investme .....

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aring in the balance-sheet was made out of the owned sources and no loan was taken for making those investments. The ld. CIT(A) has examined the disallowance even from the angle of Section 14A of the Act. The ld. CIT(A) accepted the submission of the assessee and allowed relief to the assessee. The relevant finding of ld. CIT(A) are as under: 4.4.1 The AO has made disallowance U/S 36(1 )(iii) of the Act on the ground that borrowed funds have been diverted for investment activity. It is seen that .....

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reased from ₹ 61.30 Lakhs to ₹ 2.60 crores. 4.4.2 The appellant company had taken TOD (Temporary Over Draft) from Central Bank of India on which it has paid ₹ 72,618/- Bank of Punjab. The AO has not established in his order-that the borrowed funds have been diverted for making investment. In fact the AR has submitted that except for the TOD no loan was raised and just ₹ 72,618/- was expended on the same. An investment of ₹ 4.5 crores has been made during the previou .....

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the disallowance u/s 36(1 )(iii) cannot be made. The disallowance of ₹ 72,618 lakhs is therefore deleted. 7. In view of the above discussion, we find that the order of ld. CIT(A) on the issue in dispute is well reasoned and, therefore, no interference is required. Accordingly this ground of the Revenue is dismissed. ITA No. 139/Del/2014, AY 2010-11 8. The following grounds of appeal are raised in the instant appeal: 1. The order of Ld. CIT(A) is not correct in law and facts. 2. On the fac .....

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e ld. CIT(DR) relied on the order of the Assessing Officer, whereas none represented on behalf of the assessee. 10.1 We have heard the submission of ld. CIT(DR) and perused the material on record. The Assessing Officer observed that during the relevant previous year the assessee company has received dividend of ₹ 40,76,753/- and the same has been claimed as exempt from tax. On 31.03.2010, the assessee company was having total investment of ₹ 8,44,56,010/- , on account of which divide .....

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M/s Firepro Wireless Pvt. Ltd. He further submitted that the interest payment of ₹ 66,50,248 made during the year was related to the said loan of ₹ 4.57 crores taken during the financial year 2008-09 and has nothing to do with the investment made by the company. He, therefore, stressed that the action of the Assessing Officer in taking the interest expenditure for calculating disallowance under rule 6D was wrong and submitted that no expenses were directly linked with the investment .....

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ng in the assessment order that he was not satisfied with the correctness of the claim of the assessee that no expenditure was incurred for investment activity. This is the requirement of law as held in the case of Maxopp Investment Ltd. (Supra). Thus the disallowance made by the AO cannot be confirmed on these lines. However there is no merit in the appellant's claim that no expenditure has been incurred for the investment activity. It is a fact that the appellant had a sizeable income from .....

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